Why purpose-led companies fare better in today’s turbulent world

• A clear purpose is key to navigating the rapidly changing technological landscape and fostering a culture of innovation.?

• Purpose answers a key question: why does your business exist? The answer to this can be a source of resilience and agility during turbulent times.

• Purpose-led companies not only make a larger societal impact but also generate more profits while keeping their employees more engaged.

Let’s face it - being a leader in today’s world is certainly challenging. Environmental and public health woes and changing social values are causing a massive shift in priorities that traditional leadership simply isn’t cut out to handle. I am not alone when I say that companies whose core reason for being is maximising shareholder value will have trouble surviving, let alone thriving. Only 7% of Fortune 500 CEOs think their organisations exist solely for profits and that social goals are nothing but distractions. The remaining 93% seem to agree with me.

So, what does it take for a business to flourish in this increasingly complex environment? One word: Purpose. Defining why your company exists and what its impact on society and the planet is something that every leader needs to do. Not just defining it but integrating purpose into strategy is the key to staying resilient and profitable in the long term.?

In this article, I discuss why purpose is no longer optional in today’s world.

Defining purpose-driven leadership

Purpose-driven leadership begins by defining what your company stands for and using it to shape the strategy, actions, and culture of the organisation. In contrast to the profit-driven model, purpose-led brands are on a quest to solve specific environmental and social issues. It could be anything from reducing plastic pollution to eliminating forced labour. Remember, a purpose isn’t the same as embracing a cause. It’s something that will be the focus of your business, from the supply chain to the final product.?

What’s wonderful is that purpose-led companies outperform profit-driven ones in return on equity and employee retention. Data shows mission-driven companies wind up with a 13.1% annual return on equity - 9% higher than the S&P index. Employees in these organisations are 64% more satisfied with their work.?

Why embedding purpose is critical in a rapidly changing world

The COVID-19 pandemic exposed the fragility of businesses and supply chains. It served as a shocking reminder to leaders of the importance of purpose. Enterprises whose leaders, employees, and stakeholders are united by a common purpose find themselves better prepared to adapt to and tackle disruptions such as climate crises, pandemics, and social movements. Not only do they get less hurt, but they also emerge stronger compared to the competition.?

It’s the powerful combination of a long-term purpose and stakeholder capitalism that makes these businesses more resilient than the rest. Stakeholder capitalism, in contrast to traditional capitalism, goes beyond maximising profits for investors and shareholders to creating long-term value for all - employees, external stakeholders, communities, and the environment.?

McKinsey research shows that businesses with a strong environmental, social, and governance proposition and those that work towards satisfying the needs of all stakeholders generate higher value. They swing into motion a cycle of job creation and higher tax revenues while raising standards of living.?

How leaders can embed purpose into company DNA

Consumers today take into account how a brand treats its employees, the environment, and local communities while making a purchase decision. According to CommBank Consumer Insights Report, more than 50% of consumers favour purpose-led brands. In fact, one in five shoppers is willing to pay at least 10% extra for products from a purposeful brand. As leaders, here’s what you can do to make your organisation more purposeful:

Clear and authentic purpose statement: A singular purpose is needed now more than ever, considering how multifaceted companies have become. While an organisation’s core reason for being is initially shaped by the logic and emotions of its founders, to make it effective, it should be as meaningful to both internal and stakeholders. A purpose statement should be clear, authentic, and long-term so it can guide business decisions today and in the future.?

It should be long-term but not set in stone. As the world and your business evolve, your core purpose might need revisiting to make sure it’s inclusive enough to bond all stakeholders. For instance, Patagonia changed its purpose statement from ‘build the best product’ to ‘save our home planet’ to prioritise the planet’s needs above shareholders’.

Put purpose into practice: It’s easy to match goods and services offered by your company to the purpose if you’re just starting out. However, brands that’ve been around for a while might need to review the product mix to align it to the corporate purpose if it isn’t already. For example, when British Petroleum, an energy company, adopted a new purpose of ‘reimagining energy for people and planet,’ it walked the talk by exiting the petrochemical business. It also rolled out initiatives to reduce legacy energy business and shift to low-carbon energy alternatives, like hydrogen and bioenergy. Leaders should aim to integrate purpose into every element of the organisation, from supplier behaviour to external engagement.?

Engage and empower people: It’s surprising that less than half of employees know what their organisation stands for. You can address this by hiring the right people - who reflect the values of the company. Next, empower this talent to contribute to the larger mission through purpose-led KPIs, training, incentives, and professional growth opportunities. It’s for these reasons that employees in purpose-led organisations have been found to be four times more engaged at work.

Align with measurable outcomes: Some of the world’s most admired brands have metrics to prove the difference they make. It’s what makes their stories so authentic and compelling. ESG metrics, third-party certifications, and sustainability reporting can act as powerful to articulate impact. However, don’t let ESG reporting define your purpose. It should be personal and unique to your organisation. Setting unique, measurable targets and routinely tracking them is a more effective way to bring purpose to life.?

The role of leadership in driving innovation and adaptability

Some companies just sail through crisis after crisis. Ever wondered what’s their secret weapon? I believe it’s their shared sense of purpose that gets them through tough times. It acts as a guiding tool for leaders and employees - something they can refer to during decision-making. An EY survey showed nearly 64% of employees agree that a shared sense of purpose fuels innovation and their ability to respond to disruption.

In my company, we are united in our effort to wipe toxic polystyrene packaging from the face of the earth. It’s what has helped us create WOOLPACK technology - an innovative cold chain packaging solution made from waste wool otherwise destined for landfills. By sourcing discarded sheep shearing wool from Australian and NZ farmers, we provide them with an alternate source of income and a means to turn waste into resource.?

Woolpack packaging has helped our clients who are on the warpath to achieve net zero by bringing down their carbon footprint dramatically and improving transport efficiency. In other words, our purpose of keeping polystyrene out has helped us create long-term value for all our stakeholders, including the local community. Our mission-driven advocacy efforts helped us win a $4.8 million federal government grant to set up a sovereign fibre manufacturing facility - benefiting both the local community and Australian businesses that are trying to make their supply chains more resilient.

The future of leadership – what’s next?

Traditional leadership also has a purpose. However, that purpose is more or less focused on generating profits. There’s no denying that improving earnings is essential. Still, today’s world demands leaders that go beyond maximising returns for shareholders to creating value and impact for a broader set of stakeholders, including the planet and society. Technology is a powerful tool that can help leaders foster change in their organisation by creating a culture of innovation. It liberates leaders and employees from routine tasks, giving them more time to strategise and innovate.?

When you’re leading a purpose-driven enterprise, you need all your stakeholders to be by your side. Education and incentive programs, ongoing dialogue, and measuring progress and linking it to financial performance are some strategies that can help manage stakeholders’ resistance to change. For more on this topic, read my article on the importance of engaging stakeholders.

A call to action for purpose-driven leaders

A purpose is a company’s “North Star” - a clear reference point that makes sure you never go off course when around you is changing at breakneck speeds. It also tells people what your brand stands for. A purpose is more than a mission statement. It must be embedded throughout your organisation. Purposeful companies will not only thrive in the face of change but will also contribute more to a sustainable and equitable future. In other words, if a purpose-led brand disappears tomorrow, the world will miss it!

Are you leading a purposeful brand? If yes, what steps are you taking to make it one? Share your thoughts in the comments!